The European Commission has issued updated guidance for industry to prevent Russian export control and sanctions evasion. This guidance is designed to aid industry in identifying Russian evasion tactics, safeguarding G7 technology from unauthorised appropriation, minimising reputational risk, and mitigating liability exposure, all while reinforcing the effectiveness of existing export controls and sanctions.
In early 2023, the G7 introduced the Enforcement Coordination Mechanism (ECM) to promote compliance with these regulatory measures. By September 2023, the ECM had established a Sub-Working Group on Export Control Enforcement to facilitate enhanced information-sharing and develop best practices for detecting and preventing export violations. This guidance document offers support to industries through:
1. A comprehensive list of items at high risk of diversion to Russia.
2. Updated indicators signalling potential evasion of export controls and sanctions.
3. Best practices for identifying and managing these risks.
4. Screening tools and resources to support robust due diligence processes.
You can find updated guidance here.
Recommendation of ECOVIS ProventusLaw:
- Integrate the updated evasion indicators in the guidance into transaction monitoring systems to detect potential sanctions breaches more effectively. Staff involved in transaction screening should receive targeted training on these new indicators to support the timely identification of high-risk transactions.
- Employ the recommended screening tools and resources to reinforce due diligence measures, particularly for clients and counterparties with potential Russian exposure. Establish procedures to assess clients' trade practices and supply chains for indicators of potential sanctions evasion.
- Collaborate with industry associations, other financial institutions, and relevant government bodies to stay updated on emerging risks and best practices shared through the ECM's Sub-Working Group on Export Control Enforcement. This collaborative approach can provide insights into patterns of sanctions evasion, aiding in developing more effective risk management strategies.
- Conduct an internal review of current export control and sanctions policies to ensure they align with the latest guidance. Revise policies to mitigate exposure to reputational damage and regulatory liability due to non-compliance with the enhanced sanctions measures.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
